Full text of Agricultural Survey : Fourth Quarter 2013
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Fourth Quarter 2013 DALLASFED Agricultural Survey Quarterly Survey of Agricultural Credit Conditions in the Eleventh Federal Reserve District Survey Highlights B ankers responding to the fourthquarter survey continued to report negative effects from drought, although some areas saw improved conditions resulting from recent rains. Timely rains benefited the harvest in some areas and the winter wheat crop in others. Cattle prices remained strong, and pasture conditions saw some improvement. Respondents in a couple regions expect a downturn in agricultural real estate values. Farmland values in the fourth quarter were above year-ago values. Ranchland and irrigated cropland values increased more than 4 percent over last year, while dryland values were about 2 percent above last year’s level. Overall, respondents continued to expect farmland values to trend up. Demand for agricultural loans continued to decline, as did loan renewals and extensions. Loan repayment rates increased again this quarter, with one contact noting strong oil and gas-related activity contributing to loan pay-offs. Volumes for most types of loans continued to decrease. The exception was operating loans, for which demand was the same as fourth quarter last year. Farm Lending Trends What changes occurred in non-real-estate farm loans at your bank in the past three months compared with a year earlier? Index Beginning with this publication, series exhibiting seasonal patterns will be seasonally adjusted. 2013:Q3 2013:Q4 pGreater Same qLess –10.5 –3.6 16.7 63.0 20.3 24.6 27.0 30.1 66.8 3.1 7.5 6.1 11.5 83.1 5.4 –6.1 –6.1 2.7 88.4 8.8 Demand for loans* Availability of funds* Rate of loan repayment Loan renewals or extensions Index 50 Availability of funds* 40 30 Rate of loan repayment 20 10 0 –10 –20 Loan renewals or extensions –30 Demand for loans* –40 –50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 What changes occurred in the volume of farm loans made by your bank in the past three months compared with a year earlier? Index Percent reporting, Q4 2012:Q3 2013:Q4 pGreater Same qLess –0.7 –1.4 15.7 67.4 17.0 Feeder cattle loans* –15.5 –3.7 12.1 72.1 15.8 Dairy loans* –14.0 –14.0 1.9 82.2 15.9 –5.0 –4.3 5.4 84.9 9.7 5.6 0.0 14.0 72.0 14.0 Farm machinery loans* –12.7 –12.1 8.2 71.5 20.3 Farm real estate loans* –10.5 –6.1 10.2 73.5 16.3 Non-real-estate farm loans Crop storage loans* Operating loans What’s New This Quarter: Percent reporting, Q4 *Seasonally adjusted. NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease. } Quarterly Comments District bankers were asked for additional comments concerning agricultural land values and credit conditions. These comments have been edited for publication. Region 1 • Northern High Plains XXThe moisture situation has improved, but drought has not broken yet. Lower commodity prices will affect profitability next year. As a result, we have probably seen the top of the agriculture real estate market. Region 2 • Southern High Plains XXDrought continues to hurt agriculture in our area. We need rain as our water tables continue to decline. Congress needs to provide the agriculture industry with a workable farm bill. Region 3 • Northern Low Plains XXLack of rain continues to be a problem, resulting in poor crops, no grazing and lack of stock water. Some pastures haven’t been stocked in two years due to lack of water. If we don’t receive rains this spring, we will be in real trouble for drinking water in area towns. Region 4 • Southern Low Plains XXIn our area, we are locked into cotton as our primary crop. Winter wheat is not an option other than as a cover crop. With the rise in expenses, we believe cotton will become a very marginal crop with low profitability. In the near future we could see some land being turned into Conservation Reserve Program land or grass for grazing. We believe this could impact the farmland values. XXFarm real estate is not moving, neither for pasture nor crop land. XXThe coming year will present multiple problems for those who are not “least cost producers.” It doesn’t appear that the commodity prices will justify the fixed costs associated with the debt that most producers are carrying. We expect land prices and lease prices to decrease. Already we are seeing some producers sell land in order to make their fixed payments on their other assets. Only the cattle industry has a positive outlook in our area, if we are indeed out of the multiyear drought we’ve been experiencing. Region 5 • Cross Timbers XXDrought conditions have improved slightly, which allowed pasture conditions to improve slightly. Some farmers and ranchers were able to get wheat planted early and have a good start, if we continue to get adequate rainfall. 12 N E W M E X I C O Regions of the Eleventh Federal Reserve District XXCattle prices are still very high, especially for replacements of cows culled due to the 2011 drought that are being sought now that pastures have recovered some. The dairy situation is somewhat better. We seem to have hopefully carry over into next spring. Replaceadequate hay supplies. Winter pastures are OK, ment heifers are going to be hard to find in the spring if rains continue, and prices should be with adequate moisture in most of our area. at all-time highs. XXOur area is still dry. XXAdequate moisture and good cattle prices Region 6 • North Central Texas have had a stabilizing effect on producers. There have been no agriculture-related land XXWe had good yields on grain and cotton, but transactions recently. prices were down from last year. Cattle prices are still strong. Region 9 • Coastal Texas XXGood rains have filled tanks, and winter XXThere is a probability that real estate prices grazing is plentiful at this time. Stocker cow will remain stable or decline due to no Farm prices are extremely high. There is a shortage Service Agency direct payments. Most producof livestock in the area. ers have increased liquidity from the results of the 2013 crop. 2014 is projected to be a XXWe expect cattle prices to remain high for the next eight to 10 years because of the very mediocre year due to commodity prices, shortage of cattle. Most of our farmers have excluding cattle. had a really good last two years. Region 11 • Trans-Pecos and XXFarmers are seeking more grain storage Edwards Plateau facilities due to the market decline, especially in corn. Farmers are strategically looking at XXShipping weights have been higher this their crop mix for 2014. Movement away from year for all classes of cattle. Most areas grew a volatile corn market may include sunflowers some grass, but pasture conditions are still and milo. extremely spotty. Range conditions are limiting Region 8 • Central Texas XXOil and gas activity remains strong in the area with new leasing activity bringing in additional dollars and continued loan payoffs from existing customers. Pasture conditions are fair to good, with oats and rye grass coming on, but we need continued rain to be able to start grazing in December. Hay supplies remain ample at this time, with producers still having hay to sell. Calf prices remain strong and will Agricultural Survey • Fourth Quarter 2013 • Federal Reserve Bank of Dallas herd growth. XXLand values have crept up from last year. They are now back to 2007–08 levels on the premium properties. The less desirable properties have not been as marketable as they were pre-2008. XXThe western Hill Country had some beneficial moisture this fall and early winter, even though it came with some unusually cold temperatures, which were hard on livestock. However, ground moisture conditions at this Rural Real Estate Values—Fourth Quarter 2013 1 Banks1 3 Average value2 Percent change in value from previous year3 Cropland—Dryland District* 2 4 L O U I S I A N A 5 6 11 7 T E X A S 8 13 111 1,502 1.8 Texas* 1 Northern High Plains 101 16 1,527 772 1.8 8.0 2 Southern High Plains 13 648 –0.9 3 Northern Low Plains* 10 869 5.6 4 Southern Low Plains* 9 886 –3.9 5 Cross Timbers 9 10 7 1,436 5.1 14 2,232 –0.4 7 East Texas* 5 1,911 –7.0 8 Central Texas 9 2,994 5.3 9 Coastal Texas 5 1,960 8.2 n.a. n.a. n.a. 12 1,529 1.0 n.a. 8 n.a. 1,850 n.a. 2.3 88 6 North Central Texas 10 South Texas 11 Trans-Pecos and Edwards Plateau 12 Southern New Mexico 13 Northern Louisiana time of year are better than in the past several years. Livestock prices remain high, and some ranchers remain optimistic that this trend will continue, due to decreased numbers of cattle, sheep and goats. For some who sold out in the last couple of dry years, the price to restock their herds at this time results in a bit of sticker-shock. Some older operators or part-time ranchers have opted to stay on the sideline for a while. As always, rainfall will be the key factor in their decision to get back in. XXCattle prices remain good. Pastures and grain fields are furnishing good grazing due to recent rains. Region 12 • Southern New Mexico XXLate monsoon rains substantially improved range conditions and were timely for cotton. Most of the harvest of cotton is complete, with pecan harvest beginning. Cropland—Irrigated District* 2,211 4.9 Texas* 1 Northern High Plains 75 2,008 2.5 16 2,125 9.7 2 Southern High Plains 12 1,504 –4.3 3 Northern Low Plains* 7 1,596 14.8 4 Southern Low Plains 6 1,442 –1.7 5 Cross Timbers 4 2,413 –0.7 6 North Central Texas 6 2,450 –12.5 7 East Texas 3 2,300 0.0 8 Central Texas 6 3,392 3.1 9 Coastal Texas 4 2,163 –16.7 n.a. n.a. n.a. 10 2,335 3.4 12 Southern New Mexico 5 3,540 19.8 13 Northern Louisiana 8 2,775 7.3 131 120 1,457 1,745 4.1 2.9 10 South Texas 11 Trans-Pecos and Edwards Plateau Ranchland District* Texas* 1 Northern High Plains 16 519 6.1 2 Southern High Plains 10 548 –4.2 3 Northern Low Plains 10 905 11.5 9 1,019 3.9 5 Cross Timbers 6 North Central Texas 10 17 1,725 2,244 –7.4 –3.6 7 East Texas 4 Southern Low Plains* 14 2,250 –3.8 8 Central Texas 9 4,044 3.9 9 Coastal Texas 4 1,700 7.8 n.a. n.a. n.a. 10 South Texas 11 Trans-Pecos and Edwards Plateau 19 1,634 4.7 12 Southern New Mexico 4 224 68.8 13 Northern Louisiana 7 1,550 4.5 *Seasonally adjusted. 1 Number of banks reporting land values. 2 Prices are dollars per acre, not adjusted for inflation. 3 Not adjusted for inflation and calculated using responses only from those banks reporting in both the past and current quarter. n.a.—Not published due to insufficient responses but included in totals for Texas and district. Agricultural Survey • Fourth Quarter 2013 • Federal Reserve Bank of Dallas Real Land Values Real Cash Rents 2005 dollars per acre 2,200 2005 dollars per acre per year Irrigated 2,000 2005 dollars per acre per year 60 120 Irrigated 50 1,800 1,600 Ranchland 1,400 Dryland 1,200 100 40 80 Dryland 30 1,000 800 60 20 40 600 Ranchland 400 10 20 200 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 All values have been seasonally adjusted. Anticipated Farmland Values and Credit Standards Long-term farm real estate Intermediate term Other farm operating 0 All values have been seasonally adjusted. Interest Rates by Loan Type Feeder cattle 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fixed (average rate, percent) What trend in farmland values do you expect in your area in the next three months? Index Anticipated trend in farmland values* 6.37 6.47 6.32 6.19 2013:Q1 6.43 6.53 6.30 6.12 Q2 6.21 6.39 6.22 6.01 2013:Q4 pUp Stable qDown 12.5 8.6 10.6 87.4 2.0 What change occurred in credit standards for agricultural loans at your bank in the past three months compared with a year earlier?† Credit standards 2012:Q4 Percent reporting, Q4 2013:Q3 2013:Q3 2013:Q4 pTightened Same qLoosened 4.7 9.5 9.5 90.5 0.0 Index 50 Q3 6.16 6.34 6.25 6.04 Q4 6.16 6.27 6.17 5.86 40 30 10 0 –10 Variable (average rate, percent) Credit standards † 20 Anticipated trend in farmland values* –20 2012:Q4 5.83 5.93 5.94 5.62 2013:Q1 5.87 5.98 5.84 5.57 Q2 5.81 5.94 5.80 5.47 –50 Q3 5.71 5.81 5.71 5.47 *Seasonally adjusted. †Added to survey in second quarter 2011. Q4 5.69 5.75 5.71 5.42 NOTE: Survey responses are used to calculate an index for each item by subtracting the percentage of bankers reporting less from the percentage reporting greater. Positive index readings generally indicate an increase, while negative index readings generally indicate a decrease. –30 DALLASFED –40 2010 2011 2012 2013 Agricultural Survey is compiled from a survey of Eleventh District agricultural bankers, and data have been seasonally adjusted as necessary. Data were collected Dec. 3–11, and 149 bankers responded to the survey. This publication is prepared by the Federal Reserve Bank of Dallas and is available without charge by sending an email to email@example.com or by calling 214-922-5254. It is available on the web at www.dallasfed.org/research/agsurvey. For questions, contact Amy Jordan, 214–922–5178. Agricultural Survey • Fourth Quarter 2013 • Federal Reserve Bank of Dallas